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FDIC Sees Number of Problem Banks Fall in Q2

As bank failures dwindle, ""FDIC"":http://www.fdic.gov/-backed institutions continue to see their own coffers swell, with an agency report finding that banks with government guarantees earned $34.5 billion over the second quarter.


In the second quarter of 2011, FDIC-insured institutions earned $28.5 billion.

The FDIC also noted fewer ""problem"" institutions for the fifth consecutive quarter. Those identified as problems fell from 772 to 732, making this year one for the smallest problem banks since fourth-quarter 2009. Assets for institutions on the decline fell from $292 billion to $282 billion.

Of those problem institutions, only 15 shuttered their doors over the second quarter, the lowest number since year-end 2008. Forty banks have failed so far this year.

With fewer banks failing, the FDIC's embattled Deposit Insurance Fund posted a net worth of $22.7 billion, which rose from $15.3 billion from the end of March. The loss reserve declined from $5.3 billion to $4 billion over the second quarter, with insured deposits growing 0.7 percent over the same time frame.

Loans and leases 90 days or more past due fell for a ninth straight quarter, with noncurrent loans and leases stooping to their lowest in more than three years.

Loan balances meanwhile ticked up by $102 billion, increasing for the fourth time in the last five quarters.

""The banking industry continued to make gradual but steady progress toward recovery in the second quarter,"" FDIC Acting Chairman Martin J. Gruenberg said in a statement. ""Most institutions are profitable and are improving their profitability. All of these trends are consistent with the moderate pace of economic growth that has occurred over the past year.""

According to the FDIC, nearly two-thirds of all banks, or 62.7 percent, saw growth in their quarterly net income on a year-over-year basis.

Financial institutions also fielded fewer losses on the whole, with net losses dropping quarter-over-quarter to 10.9 percent, down from 15.7 percent from the year before. The average return on assets went up to 0.99 percent from 0.85 percent over the same time frame.

Banks saw second-quarter losses to the tune of $14.2 billion, still 26 percent less than $19.2 billion set aside for expected losses over the same quarter.

With loan sales up by $3 billion, net operating revenue rounded out to $165 billion, reflecting $1.3 billion in increases. The FDIC report showed that investment securities and other assets rallied at $1.7 billion more than in the second quarter last year.

The agency found asset quality indicators picking up as insured banks and thrifts accounted for $20.5 billion in uncollectible loans during the last quarter, a decline of $8.4 billion from the year before.

About Author: Ryan Schuette

Ryan Schuette is a journalist, cartoonist, and social entrepreneur with several years of experience in real-estate news, international reporting, and business management. He currently lives in the Washington, D.C., area, where he freelances for DS News and MReport.

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